Merck (MRK)-Gilead (GILD) Hepatitis C Drug Patent Dispute: Jury Gives Unanimous Decision In Merck’s Favor

A federal jury in San Jose, California, upheld the validity of two patents co-owned by Merck that the company says rival Gilead Sciences infringed on for its blockbuster hepatitis C drugs, according to reports Tuesday. While the jury has yet to decide the amount of damages Gilead must pay Merck and Ionis Pharmaceuticals, the other patent co-owner, Merck is claiming 10 percent royalty on Gilead’s U.S. sales of about $21 billion in 2014 and 2015.

The patent trial began on March 7, with Merck claiming it was owed a share of Gilead’s earnings from the latter’s sales of Sovaldi and Harvoni, both blockbuster drugs for hepatitis C. Merck claimed that sofosbuvir, the active ingredient in both the drugs, was related to compounds for which Merck holds patents. Gilead had filed a case in 2013, seeking for Merck’s patents to be declared invalid, according to the Wall Street Journal.

Sovaldi and Harvoni had combined sales of $19.2 billion last year. After the jury announced its decision in Merck’s favor Tuesday, the company said it was seeking over $2 billion in damages from Gilead for past sales, as well as 10 percent royalty on U.S. sales of both the drugs going forward, Reuters reported.

The jury, made up four men and four women, ruled unanimously in favor of Merck on all 10 claims it made, according to Bloomberg.

Ionis will receive 20 percent of any damages awarded to Merck.

Asthika Goonewardene, an analyst for Bloomberg Intelligence in New York, said the verdict was only half a win for Merck, which launched its own hepatitis C drug, Zepatier, in January. “What they really want is to see that do well,” she said, referring to the drug.

Michael Yee, biotech analyst for RBC Capital Markets, told Reuters that while the judgment did not sound good for Gilead since it could theoretically owe Merck billions of dollars, “it is a small amount relative to Gilead’s $127 billion market cap.”

Gilead shares had closed Tuesday trade 1.13 percent higher on the New York Stock Exchange but fell in after-hours trade once the verdict was announced. In pre-market trade Wednesday, the stock was down 2.4 percent. Meanwhile, Merck shares, which had ended regular trade in Nasdaq 0.45 percent higher, gained over 2 percent in after-hours trade. Ionis, which was higher by 2.76 percent in regular trade, jumped sharply by almost 9 percent during after-hours trading.